Higher Interest Rates: What is the difference between Bank FD and Corporate FD, in which will you get more return on investment?

Bank FDs have guaranteed returns and the principal amount is safe. However, corporate FDs usually offer higher interest rates than bank FDs due to the increased risk.

Higher Interest Rates: For investors who want stability and reliable returns, fixed deposits have long been a preferred choice. FDs offer assured returns and provide a sense of financial security. FDs (Fixed Deposits) are not just limited to traditional bank fixed deposits. In recent years, corporate FDs have also become popular as an alternative investment option. Many investors face a dilemma while choosing between corporate FDs and bank FDs. While both are aimed at growing your savings, you should know some important differences between these two FDs before making a decision.

What does Bank FD mean

Bank FD (Fixed Deposit) is a financial instrument offered by banks where you deposit a lump sum amount at a predetermined interest rate for a fixed period. It is considered a low-risk investment as there is a guaranteed return and the principal amount is safe. Bank FDs offer different interest rates depending on the period and are usually insured up to ₹5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

What does Corporate FD mean

Corporate FD is a fixed deposit offered by companies or corporations. Like a bank FD, you deposit an amount for a fixed period and the company provides you interest on the principal. However, corporate FDs usually offer higher interest rates than bank FDs due to the increased risk. This FD does not have guaranteed returns by government agencies, so it is a bit risky. Therefore, you should carefully assess the financial position of the company before investing. Corporate FDs are perfect for those who are willing to take higher risks in exchange for potentially higher returns.

What is the difference between bank FD and corporate FD

The interest rate in bank FD is usually low. Talking about the safety of the deposit, it is generally considered safe due to RBI rules and DICGC insurance of up to Rs 5 lakh. You can also get tax exemption on FDs with a lock-in period of 5-10 years. According to Tata Capital Moneyfy, a penalty of 1-2% interest is levied on premature withdrawal in bank FDs. The investment period in bank FDs ranges from 7 days to 10 years.

Whereas, the interest rate in corporate FDs can be higher. Also, it can potentially give better returns. Talking about the safety of the deposited money, the risk in corporate FDs is higher due to dependence on the financial support of the issuing institution. You do not get any tax exemption on investment in corporate FD. Also, if you withdraw the money deposited in corporate FD before time, then 2-3% interest is charged. Investment can be made in corporate FD for 6 months to 5 years.

Conclusion

Overall, investing in bank FDs gives you guaranteed returns and your money is also safe. Yes, the interest rate may be a little low. But in corporate FDs, the interest rate may be higher, but there is also a risk regarding the deposited money.

(Disclaimer: This is not an investment advice but just an information. Consult your financial advisors before taking any decision related to money.)

The post Higher Interest Rates: What is the difference between Bank FD and Corporate FD, in which will you get more return on investment? first appeared on informalnewz.

News